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On the Road to 50-50

By: Greg Seminara,Export Solutions

Topics:Export Development

Nestle sources 56 % of its sales from Developed markets like Europe and the USA. These markets experienced organic growth for Nestle of 1.1 % in 2014. Emerging markets, representing 44 % of Nestle's sales recorded organic growth of 8.9 %. Unilever sources almost 60 % of sales from emerging markets and P & G close to 40 %. Few of us boast the scale or resources of these three industry bellwethers. However, it's a smart idea to set a target of 50 % of your sales from your home country and 50 % from international. Another benchmark is to set goals for percent of sales from emerging markets. Citizens in new markets will continue to eat better and live healthier , with exponential growth of the middle class and international supermarket channel. However, most companies remain anchored to the past , with resources devoted to managing "old businesses in mature countries". Real progress can be achieved through research and investment to multiply your sprouting sales in flourishing regions of Asia, Latin America, and the Middle East. This requires a tricky balancing act of maintaining your existing business base while shifting focus to far flung markets.

Move from your Backyard Most USA companies count on neighboring Canada, the Caribbean, and Central America for the bulk of their export sales. This is natural, given the proximity to producing plants and familiarity with "Made in the USA" products. Similarly, experienced European exporters have cultivated strong businesses in adjacent European countries. "Border" businesses are a logical first export step. Nearby countries tend to be easier to manage and may share comparable eating and lifestyle habits. In many cases, these businesses were optimized many years ago. Committed companies must place serious new stakes in the ground in distant markets outside your comfort zone if you desire to obtain more than your fair share of future industry expansion.

Export vs. Strategic Brand Building ?I frequently raise the question of "What does it take to build a brand in your home country ?" during my export speeches and workshops. The consistent responses focus on the fundamentals of research, adaption to local tastes, in country production, well connected sales team, and investments in consumer marketing and trade activities. This approach is often at conflict with export reality. Export tactics involve shipping a standard package from your home plant with a modest investment and hope for brand acceptance in a foreign country. Winners have the ability to bridge the gap between strategic brand building and opportunistic exports.

Regional Hub Model Successful companies understand that you need to get close to the consumer and your customers. Advanced suppliers have already established regional sales offices in places like Singapore, Panama, or Dubai. One model is to extend this concept to create regional manufacturing centers. This can be achieved through a new factory, contract packer, or acquisition of a local category competitor. These regional hubs can export to adjacent countries. General Mills and Heinz are two of the most successful multinationals in Brazil. Both acquired local food companies and leveraged this platform to sell their international product portfolio. In 2015,Pringles will open a new plant in Malaysia to meet future demand in Southeast Asia.

New Flavors, Small Packs Eating habits and practices are different in emerging markets Portion sizes are smaller and a meal may feature many dishes. How well does your product pair with rice ( or beans) ? Candy and Snack products are the exception, with a universal acceptance for most "sweet segments". In every country, upscale shoppers exist , hungry for foreign brands at any price. While this is your initial target market, you ultimately need to reach the masses with products in sync with their cuisine. Affluent western shoppers fill shopping carts with large sizes to store in kitchen pantries. Emerging market consumers shop daily , allocating limited funds to purchase essential food items. International marketers need to consider small sizes with affordable price points to be relevant in low gdp countries like the VIP's ( Vietnam, Indonesia, & Philippines).

Commit to One Country Too many export programs aim to plant small flags everywhere. This does not impress anyone if you've created a handful of minor businesses, particularly in large , high potential countries. Better idea is to identify one country with superior growth prospects. Study the market and commit financial and "human capital" to the country. Encourage senior management and functional team leadership visibility to the project. Set 3, 5, and 10 year objectives, as these investments will not pay out in the short term. In 2014, I helped one of my forward thinking clients study 17 potential expansion countries. "Crawl, Walk, Run".

2015 Hot Markets Many global citizens continue to live better and eat better. This expanding middle class creates new potential consumers for our brands. Asia contains 4.4 billion people, more than 61 % of the world's mouths. China and the VIPS represent the best potential, with India a target for those further along the development curve. Latin America population now exceeds 600 million with GDP larger than the UK,Japan, and India combined. Brazil, Mexico, and Colombia are strategic countries where all brands should be performing at much higher levels. The Middle East reflects a dynamic marketplace, particularly in the oil rich nations of Saudia Arabia,UAE,Qatar and Kuwait. Population totals more than 300 million and is growing exponentially through birth rates and expatriate workers. These markets offer attractive long term return on investment versus trying to mine new sales from declining countries.

USA - Bigger than BRIC'sThe USA features a population of 324 million relatively affluent consumers. USA citizens are open to cuisines from around the world. A typical American diet would include Italian,Asian, and Mexican food . Most international companies sell in the USA, but per capita sales levels are small relative to potential. The issue relates to the practice of treating the USA as another "export market". Success requires a USA based manager and a hybrid organization including channel specific "Food Brokers". Consider construction of a small factory or a contract packer. Be prepared to invest in consumer and trade programs, just as you would in your home market.

Export Solutions Can Help Our Distributor identification services completed more than 300 distributor search projects on five continents. This year,we've helped brands find distributors in tough to access countries like Brazil,Mexico, Indonesia, and the Philippines. Export Solutions has the unique ability to leverage the power of our distributor database with prospective distributor candidates. Our leading distributor database covers 93 countries and more than 6,000 distributors and importers of supermarket products. This includes more than 1,800 confectionery and snack distributors. Our database has been recognized for excellent coverage of emerging markets such as India, Brazil, and Mexico. Contact us to learn more about how Export Solutions can leverage our distributor contacts for your benefit in 2015.